China factory-gate inflation slows more than expected in July

China's producer price inflation slowed more than anticipated in July, as reported by Reuters citing official data from the National Bureau of Statistics. The index increased 3.5% year-on-year, down from a 4.1% rise in June and the weakest annual increase in three months. Economists had forecasted a 3.8% rise. This moderation occurred despite global energy prices falling, even with the ongoing U.S.-Iran conflict.

While lower commodity costs eased pressure on some manufacturers, several companies still grapple with high input expenses and weak domestic demand. China's economic recovery has been inconsistent, with strong factory production and exports but weaker household spending and domestic demand. Upstream industries and high-tech manufacturers have maintained solid profit growth.

However, companies primarily focused on Chinese consumers face tougher conditions due to slowing economic momentum. "Consumer and producer inflation weakened in July," stated Zhiwei Zhang, chief economist at Pinpoint Asset Management. The figures align with other economic indicators, including a larger-than-expected decline in China's purchasing managers' index.

Chinese leaders have pledged to bolster growth by increasing fiscal spending on already budgeted infrastructure projects. Zhang cautioned that it would take time for this extra expenditure to influence economic activity. The recent inflation data may signal that Beijing will maintain policy support throughout the year to bolster domestic demand.